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Leasehold Mortgages: The Overview

Leasehold estates are one option for home ownership.

Leasehold estates are one option for home ownership.

Orange County, CA – Homes are getting more expensive fairly quickly. So many buyers who thought they were ready to jump into the market a few months ago are looking for options that will allow them to get the home they want without the sticker shock. One choice is called ‘leaseholding’ or ‘purchasing a leasehold estate.’

In some cases, a home purchase doesn’t include the land beneath it. It’s called a leasehold estate and some home developments desire or require this arrangement. Why is this important? Because it means that you don’t actually own the land under your home. With the leasehold estate, the person who owns the land leases it to the person who owns the home attached to that land.

Lease the Land; Buy the Home

The essence of a leasehold estate is that you arrange with a landowner to lease the land under your home for a period of time, at least a few years, and rarely more than 99. Leasing the land, even for an extended period of time, is noticeably less expensive than purchasing it. On the other hand, owning the home allows you the ability to do anything you care to with it without having to consult your lease-holder (short of digging a swimming pool or other major modifications to the property itself.)

Leaseholder estating thus provides the tenant with the flexibility of home ownership with the reduced cost of not being ultimately responsible for the land under and around the home.

 Leasehold Mortgages

If you lease land from another entity (which can be a business, a city or state government as well as an individual), while they hold the “real” rights to the land, it still becomes your personal property as mentioned above. Your ability to use that land is referred to as your “interest” in the land.

Leasehold mortgages are somewhat rare and often have notable restrictions on them. Next week, we’ll talk about exactly what those restrictions are when you work with us.

For now, it’s enough to be aware that mortgages are available on leasehold properties, and the options that these can open up for people interested in purchasing a leasehold estate.

Scott Storace

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